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Success and Collapse of Nokia

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Introduction

Nokia, founded in 1865, is a Finnish multinational communications information technology and consumer electronics company headquartered in Espoo. Its offices are located in Helsinki’s metropolitan area in Finland. Nokia enjoys a diverse workforce from across a hundred countries. Nokia has employed over hundred thousand employees and conducts its business in over one hundred thousand and thirty countries. In 2017 Nokia generated and reported a revenue of around twenty-three thousand billions pounds. Nokia is a public company registered in New York stock exchange and Helsinki stock exchange. Nokia emerged as the leading mobile phone revolution in the last decade. Nokia rapidly established itself as one of the most valuable brands in the world. Nokia commanded a significant global market share during its prime years. The journey to the highest global markets was gradual swift as was its decline. Its sale of mobile business to Microsoft represented the beginning of its decline and fall from global market dominance. This case study highlights the role of product innovation and brand equity in reentry into the market. Analysis of Nokia’s market failure will paint a picture of the reasons why the company failed.

Nokia’s Early Success

Historically Nokia has had numerous industries in its more than one and a half centuries since its inception. Nokia began to commercially deal with large scale telecommunications infrastructures and technology development and licensing in the early 1990s (Christensen, 2013). Since then, Nokia established itself as a significant mobile phone telephony industry operator due to its development of GSM, 3G, and long-term evolution (LTE) and currently the rollout of the 5G frequencies. Nokia also enjoys the largest worldwide vending supply chain of mobile phones and smartphones. The partnership between Microsoft and Nokia in 2013 and market struggles in 2014 establishes the highlight and the beginning of the collapse of Nokia (Christensen, 2013). In 2014 Microsoft sold its business to Microsoft mobile and continue to focus majorly on its telecommunications infrastructure, internet of things as well as investing in Alcatel Lucent Mapping division (Doz, Y., & Wilson, 2017). The company also has significant investments in virtual reality and digital health, including owning research organizations (Bella Labs).

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Nokia had established itself as one of the most successful mobile phone companies in the world with a sizeable market share in mobile phones that amounted to a monopoly. Entry on new market players with aggressive and innovative ideas displaced Nokia from its market share. Nokia had very little competition, and the entry of new mobile phone operators with new and innovative features led to significant competition and eventual fall from its giant status as well as dominance. It easy to blame aggressive market competition from other competitors like Google, Samsung, and Apple, but this narrative will ignore the fact that the company had various underlying strategies that led to its collapse way before other mobile communications companies entered the market. Some of the factors that have played a critical role in the decline of Nokia include technological advancements and rapid growth of complex market demands.

Some of the most salutatory lessons from Nokia are observed when it was very young and successful. Nokia, early success was due to united and vibrant leadership with visionary management that led to courageous choices that led to innovative technological digitization and deregulation of telecom networks spreading across Europe and the entire world. In the mid-1990s, the Nokia supply almost collapsed due to its success. The Nokia management quickly initiated disciplined systems and processes that enabled efficiency and scaling up of production and sales. Alibage and Weber (2018) points out that during 1996 and 2000, Nokia enjoyed a hundred and fifty percent growth in mobile phone production and a five hundred and three percent growth in revenue. This early success comes with costly consequences for its managers especially those who worked in development centres. These managers found themselves with an increasingly short time to soak in the pressure of lacking enough time to dedicate their innovations in the required time. The management at Nokia focused so much on increasing their improvements that by 1996, it had its data group that spearheaded its innovation mantle. In 1996 the company launched its first smartphone with a camera coming in 2001. The main reasons for the selection of Nokia were to identify the role of product innovation and equity of a brand in the failure or success of a business. Nokia has an opportunity to reenter into the phone market, which it has since its cooperation with HMD global. This case study is vital in quashing the myth that a brand or product line does not die on the same day.

Nokia’s Fall In Smartphone Market

Some of the reasons that led to the decline in Nokia include the following; first, Nokia was to slow in adapting to the changes in the smartphone market. Notably, Nokia was a pioneer in developing some of the first smartphones, including the smartphones that ran on Symbian series operating systems in 2002 (Alibage, & Weber, 2018). The Symbian smartphone did not have trouble maintaining its lead on the smartphone business. Failure to take the courageous step and to partner with windows until very late in 2011 was one of the greatest mistakes Nokia did. Apple and Samsung introduced smartphones with innovative touch screens and in app-based applications through IOS and Android-based operating systems respectively. Nokia did not adapt or respond to this competition with the immediacy required. The Symbian operating system aged without getting the much-required security updates that IOS and Android were regularly receiving. Nokia further failed to adapt to the growing demand for pocket-sized smartphones. The iPhone design was what the industry required, and Nokia failed to adapt to the swift urgency that was required.

Samsung highlights adaptability by betting in various operating systems platforms including Android, Windows and its own Bada operating system. The android operating system paid off for Samsung at the right time as the platform showed maturation and versatility (Peltonen, 2019). Also, Nokia failed to have the panache required for its smartphone applications. A good example would be the snake game that was introduced in its classic Nokia brick phones. Other competitors tapped into other elements that the consumers demanded including having the shiniest and newest devices. Nokia then lost its panache while Samsung gained traction as the world’s leading innovator due to the marketing of its brand. Also, Nokia failed to brand itself as a leading innovator until very late when it made the partnership with windows to produce the windows Lumia phones.

Nokia further failed to have command in its execution strategy. Samsung and Apple have shown versatility like many other manufacturers in executing strategies that were appealing to their consumers. Samsung and Apple competed with Nokia by providing high end flagship smartphones that were appealing to many consumers. For instance, every year, iPhone and Samsung users know that each year, a new product with better and innovative products will be launched (Garcia-Swartz & Campbell-Kelly, 2019). This has helped to build anticipation and increase consumer demand for new and innovative products. Samsung invested in various smartphone devices that are affordable and available to the majority of populations without complicated contracts. Other competitors like Samsung also developed efficient hardware manufacturing processes with the efficient making of their displays, screens, and processors, among many other products. This highlights that Nokia’s execution strategy was inferior. However, it is essential to note that it has a substantial financial background various changes in expenditure and focusing on re-inventing as the key to rising again.

Complacency and satisfaction of being the world’s leading smartphone leader was a crucial factor in the decline of Nokia. Nokia was the market leader for almost a decade, and this contributed to complacency in its products and, therefore, the consequent failure to plan for future scenarios. Nokia’s failure to anticipate for the market and innovation changes that its competitors like Apple and Samsung had adopted led to disorganization. This led to failure in product innovation. Most of its competitors produced new products every year with notable improvements and slight modifications that were attractive to its customer base (Garcia-Swartz & Campbell-Kelly, 2019). Nokia phones and products had a signature-ready feature as opposed to future-ready consequently diminishing their click with their customer base. Other notable mistakes that contributed to its failure included failure to adapt to the operating system changes or improve its aging Symbian operating system.

Nokia further failed to account for its rapid growth and therefore negatively affecting the company’s agility and entrepreneurship. The managerial decision between 2001 and 2005 was inclined to spur the drive and energy for reinvention but unfortunately initiated the decline of the company. Some of the decisions that negatively affected the company included reassigning key leadership roles. Nokia further adopted a matrix structure that was designed to reorganize its management leadership but unfortunately led to the departure of crucial executive members and eroded the strategic thinking of the company. The strategic reorganization led to notable tensions as different departments and groups focused on differing goals that affected the company collaboration and future performance. The Nokia reorganization failed to account for the changes in resources allocation, the variations in product policies and management in products including other managerial decisions that impacted sales priorities and employee incentives. Conflict in management led to the conflict in product development between development managers and other top executives due to conflicts in resource allocation. With time the Nokia management was insufficiently technologically savvy to successfully set their priorities in a manner that could resolve the existing conflicts.

Nokia has also witnessed its fair share of infighting followed by strategic stasis that could not be cured by the notable company reorganizations that followed. Managerial decisions were trapped to old technological decisions that gradually led to the decline of the company. the managerial decisions were extremely rigid in such a way that by 2009 Nokia was compelled to use 57 different incompatible operating systems. Also, Nokia ignored critical decisions that failed to pay attention hardware production and stressed on software’s that were obsolete. Acknowledging that the company state of routines and management required swift refocusing and adapting to the business models that are versatile to fit into the evolving business environments successfully.

The Nokia managers have wide-ranging strategies and solutions that will see it rise to their former glory including adopting a more versatile operating system including Android, changing their management styles and reintroducing classic phones and ensuring that their new innovative products target medium-range smartphone consumers. Nokia also needs to invest in reliable and more vibrant market analysis, especially in developing world markets like India, Asia, and Africa. Customer feedback also plays a vital role in innovation and Nokia can learn more from its competitors and convert its customer feedback into real value. Hiring more innovative employees and adopting more aggressive brand promotion would increase its chances of repositioning as a leading global smartphone competitor. Recalling old brand images can help attract their old customer base. There will need to advertise and adopt better promotion strategies. Nokia also needs to reinforce its position by enhancing more resilient distribution chains.

Conclusion

The collapse of Nokia teaches that there is more to management decisions, failure for future planning, dysfunctional company structure s as well as internal company struggle that led to the bureaucracy that led to Nokia failing to adapt and see the shift in product-based innovations and new products from rival companies. The analysis of the decline of Nokia highlights common company traits including the growth of conservatism and hubris, which gradually leads to poor company oversight and poor strategic decisions. Nokia declined internally in embracing new innovating ideas while resisting experimenting with new technologies and consequently led to its decline from its global dominance. Companies in the future need to adapt to growth and avoid disruptive threats as a means to maintain their dominance.

References

  1. Alibage, A., & Weber, C. (2018). Nokia Phones: From a Total Success to a Total Fiasco. In 2018 Portland International Conference on Management of Engineering and Technology (PICMET).
  2. Christensen, C. M. (2013). The innovator’s dilemma: when new technologies cause great firms to fail. Harvard Business Review Press.
  3. Doz, Y., & Wilson, (2017). Ringtone: Exploring the rise and fall of Nokia in mobile phones. Oxford University Press.
  4. Garcia-Swartz, D. D., & Campbell-Kelly, M. (2019). Openness as a business strategy: Historical perspectives on openness in computing and mobile phones. Information Economics and Policy, 48, 1-14.
  5. Lamberg, J. A., Lubinaitė, S., Ojala, J., & Tikkanen, H. (2019). The curse of agility: The Nokia Corporation and the loss of market dominance in mobile phones, 2003–2013. Business History, 1-47.
  6. Peltonen, T. (2019). Case Study 4: The Collapse of Nokia’s Mobile Phone Business. In Towards Wise Management (pp. 163-188). Palgrave Macmillan, Cham.

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